Coffman Subcommittee Holds Field Hearing on Small Business Lending in Colorado
The House Small Business Subcommittee on Investigations, Oversight and Regulations Chairman Mike Coffman (R-CO) today held a field hearing in Greenwood Village, Colorado to examine the state of small business lending, focusing on Small Business Administration (SBA) loan programs and the regulatory impediments to small business lending.
The responsibility of the Subcommittee on Investigations, Oversight and Regulations is to probe the operation of government programs that affect small businesses, including the SBA, and develop proposals to increase their efficiency.
One of the biggest impediments faced by many small businesses is the inability to access sufficient credit and capital. Many small business owners are saying they need loans but are getting turned away, while banks are saying they have money to lend but aren’t finding qualified applicants. Small banks are becoming increasingly worried about risk and potential loan default during an uncertain economy. Today’s hearing reviewed lending solutions that are backed by the government and managed by the SBA. The hearing also provided a forum to air the concerns of small banks about how regulations are affecting small business lending.
“For entrepreneurs looking to start or expand a business, one of the most important things they need is financing,” said Rep. Coffman. “In order to provide a better environment for job creation, banks, regulators and elected officials must all work together to help small firms have access to the capital they need to grow and invest in their company.”
Coffman continued, “It is important for small business owners and community banks to hear from the Small Business Administration about government-backed lending programs that can help them, and it is equally important for legislators and government agencies, like SBA, to hear directly from small banks about how regulators have responded to the financial crisis of 2008 and how regulations have affected small business lending. Because of the importance of small banks as lenders to small companies, a proper balance should exist between an effective regulatory structure that protects depositors and a financial institution’s ability to lend. Public forums like today’s field hearing are very important in achieving that balance.”
Notable Witness Quotes:
Jay Davidson, Founder, Chairman and CEO of First American State Bank in Greenwood Village, CO, said, “The Great Recession of 2008 ended two years ago. The national economy should [have been] in recovery mode for two years now. That is obviously not the case. Unemployment remains painfully high, economic activity is declining, uncertainty abounds. By this time in most recessions, we would have a fully recovered economy with jobs aplenty. Something is very wrong. I hope to demonstrate that the nation is in a second Liquidity Crisis today, whose cause is excessive regulation on banks, especially those banks serving small businesses.”
David Brown, President of the Southeast Denver Centennial Bank in Centennial, CO said, “All of the new laws that have been passed will lead to new regulation, and this has been happening at a much quicker pace than at any time in the past. Each new regulation, as it is written will be very expensive for banks to understand and implement. At the current pace of regulation, the regulators are not even sure what each new regulation means, how it will be tested for compliance, and how it will be administered. If Examiners don’t understand the requirements of the regulation, the regulated will have great difficulty and expense in complying with these new regulations, not to mention guidance.”
Steve Smits, Associate Administrator for the Small Business Administration Office of Capital Access, said, “Many praised the steps that SBA took in 2009 and 2010 to help fill the gap caused by the lending freeze in 2008. As you might know, we raised the guarantee on our loans to 90 percent and waived many of the fees. As a result, we turned just $1.2 billion in taxpayer dollars into more than $42 billion in lending support. Today, those incentives have ended, but we still provide an excellent partnership for thousands of banks. In fact, our weekly lending volume is now back at levels we saw before the recession.”